7 Sept 2015
Korean Firm Aims to Revitalise Russia's Ailing Home Shopping Channels
Partnership between GS Home Shopping and Rostelecom hopes to find successful TV sales formula for Russian buyers.
TV shopping channels have never really taken off in Russia, frequently foundering on the country's logistics and geographical challenges. Back in the 1990s, a number of German companies made a valiant bid to establish a national shopping channel in the country, but this failed to gain any real traction. Instead, it was reduced to selling modest amounts of jewellery, cutlery and novelty devices, never becoming a significant element within the Russian retail market. The subsequent rise of e-commerce has also rather stolen the thunder of such channels.
This, however, could all be set to change. In something of a surprise announcement, Rostelecom, Russia's leading long-distance telecom services provider, has unveiled plans to launch the Big Universal Mall channel (Boom-TV), a joint venture with GS Home Shopping, a leading South Korean multimedia retailer. The two partners are said to be investing some US$20 million in the project, with a view to begin broadcasting in 2016. It is envisaged that the new channel will cover the whole of Russia (and possibly beyond), while making use of Rostelecom's existing telecommunications channels and other relevant assets.
The new venture is apparently setting out to be quite different from conventional TV shopping. It will, reportedly, feature a high level of interactivity, as well as a significant proportion of live broadcasts and bespoke contests. The joint venture partners are currently looking to work with other nationwide cable and satellite players, ensuring maximum penetration for the new channel. This task has been somewhat eased by the fact that many such operators already utilise the Rostelecom infrastructure.
The new channel will be in sharp contrast to many of Russia's existing home shopping channels. Typically, an average viewer has access to some three to four shopping channels among the 200-plus channels available. These all run around-the-clock, with only one of them offering anything beyond pre-recorded product demonstrations, instead interleaving them with a number of Soviet-era blockbusters. In practice, most viewers ignore these channels, believing their goods to be overpriced compared to similar products available through online vendors.
At present, Rostelecom is seeking to diversify its business interests. To date, it has failed to make any significant inroads into the e-commerce sector and remains heavily reliant on revenue from fixed telephone lines and wired internet connections, two sectors that are in steep decline. Mobile phone penetration in Russia is already said to be in excess of 100%.
The legal environment for TV shopping in Russia is quite advantageous for vendors, with it being difficult for consumers to exchange delivered products delivered. Despite this, warranty obligations, and quality and safety requirements do not discriminate with regard to goods purchased via TV shopping. Boom-TV's enlightened EU-style policy on streamlining the exchange and return of goods is expected to be a major plus in its bid to develop its customer base.
Overall, many commentators have been optimistic with regards to the prospects for this new shopping channel. GS Home Shopping has, after all, already extended its successful formula to China, Turkey, India, Thailand, Malaysia, Indonesia and Vietnam. At present, a number of other players are adopting a wait-and-see approach to the channel's launch early 2016, before reviewing their own options in the market.
Leonid Orlov, Moscow Consultant